The Strength of Our Economy Now...

...is not looking good. It's palpable to many, and all too real to still many more. But the numbers are showing it also.

We're not in a recession, if you go by the book, as we've had two straight quarters of positive GDP growth. But I think there's more to it.

For one thing, the U.S. stock markets are showing the signs we don't want to see. The up days are not happening on high trading volume, and the down days are happening on higher volume. This indicates weakness.

For another, the jobs reports are bearing bad news. Most of the new jobs are from temporary government stimulus, or from very temporary Census-related hiring.

And another example is the terrible housing data we just got. Real estate is about location, location, location, but, overall, the U.S. housing market is not going the right direction. Might even be going the wrong direction.

Here's the last of the big warning signs I'm tuned-in to at the moment: the TED Spread is starting to widen. That's the difference between the LIBOR and short-term Treasuries. An increasing TED Spread often comes before a downturn in the U.S. economy, as it indicates liquidity is being withdrawn (investors are getting a better deal in Europe than the USA).

Now, here are some positive indicators and factors:
1) U.S. corporate profits are improving, and not just on the bottom-line (which can be affected by cost-cutting) but also on the top-line (sales).
2) There are trillions of dollars on the sidelines now, sitting in cash, belonging to both consumers/investors and businesses. If things do turn around, the stock market could actually boom.
3) Europe is starting to shift from stimulus spending to "austerity" measures, and while the USA isn't exactly jumping the gun on that matter, the stimulus-oriented Democrats are not as politically strong as they were a year, or even six months, ago, and so the USA might try another tack sooner than expected.

Advice: bond funds over bonds, short- and intermediate-term bonds over long-term bonds; high-quality stocks over speculative stocks; global/flexible mutual funds over "style-pure" mutual funds; and, by all means, get rid of credit card debt and/or build-up an emergency reserves fund in a cash acct or a very low-volatility and readily-liquid ETF or mutual fund.